Banks will be able to encash digital checks

The Legislative Assembly approved a reform to the Commercial Code to add a check cashing section, which will mandate financial institutions to validly receive checks in digital format.

As per the approved provision, check truncation is a process by which physical exchange of checks as a pre-condition for release of funds to the ultimate beneficiaries is reduced or eliminated, being replaced by electronic records containing checks Image of is also included. For processing or automatic transmission.

This process also includes check clearing, which is the process by which banks exchange and settle checks deposited in their charge.

The provision states, “The bank receiving the physical check may subsequently surrender it to the bank for which it is drawn for safekeeping.”

The Central Reserve Bank of India (BCR) will be the entity in charge of making rules and managing the clearing process of checks and other payment systems between banks and other institutions of the financial system.

The period for formulating guidelines for BCR will be within a period of 90 days, the same period when financial institutions have to adopt the new provision.

Similarly, the BCR will also issue provisions on features and safeguards for physical checks and electronic records that are meant for image harvesting purposes.

Therefore, the measure will not come into effect immediately. The reform of the Commercial Code will enter into force eight days after its publication in the Official Gazette of the Republic.

According to the Assembly, the regulation will speed up the compensation process, allowing funds to be released in less time.

“(This reform) will position us as the country with the fastest clearing of checks regionally, as the process will take about four hours for payments,” said Financial Commission President Dania Gonzalez.

The Assembly highlighted that according to the BCR, 3.71 million checks were issued in 2021, equivalent to $21 million. Truncation could make the economy more dynamic and increase this figure.

Additionally, new check clearing processes and systems were developed in 2021. The time for depositing funds was also reduced from three days to only one day after presentation of the voucher for collection, which was reduced from two to one physical check exchange session.

El Salvador was late in implementation

Rafael Lemus, a Salvadoran economist, considered that this measure represents further progress in reducing the cash or bureaucratic operations of moving a check from one place to another, allowing the travel of the check and the digital image in the country. Will happen. However, he explained to El Diario de Hoy that this was a late provision.

“These checks cut are nothing new, but El Salvador is late. Honduras has it, Nicaragua, Costa Rica, Panama have it, etc. The only thing is that the government is trying to catch them and be more efficient on the issue of checks being cut,” Lemus said.

Acts that would constitute a breach

At least a dozen actions will be taken against financial institutions in relation to check truncation.

Some of these are altering, interfering with or disrupting computer systems capable of clearing cheques.